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Title Loan

Mark Cappel
UpdatedNov 22, 2010
Key Takeaways:
  • Examine the qualifications for taking out a vehicle title loan.
  • Review the options for a borrower that does not make the title loan payment.

I seek a cash-out auto loan. I declared bankruptcy three years ago. What are my chances of getting a title loan?

I am looking for cash out auto loan on a 2001 Toyota Highlander with 75,000 miles and free & clear title. I was discharged from bankruptcy on Feb 6, 2007. What are my chances for a cash-out auto loan?

Different lenders call them different things, but what you seek is called a title loan. In a title loan, a borrower in financial distress uses their vehicle's title as collateral for a short term loan.

The loans work as follows: The borrower turns over the title and keys to the vehicle. In some cases, the lender will install a GPS or starter interrupter in the vehicle to make repossession easier.

The lender loans a fraction of the vehicle's value at high interest rates — as much as 25% for one month, which equals 300% APR. The borrower is expected to pay the whole amount back, plus interest, at the end of the month.

If the borrower does not make the loan payment, there are only two options. The borrower can roll the loan over for another month, with more fees and interest. This generally leads to a dangerous cycle of borrowing and rolling over the loan amount. In some cases, as the loan amount increases it becomes almost impossible to pay the debt. The other option is the lender repossesses the vehicle.

Your Title Loan Question

As indicated above, the qualifications for a title loan are minimal: You need a vehicle title that has no lien holder. The title lender will not care about your credit rating, recent bankruptcy, income, or debt-to-income ratio. If you do not pay the lender's recourse is to repossess your vehicle.

I do not recommend a auto refinance, cash-out auto loan, or whatever the lender calls a title loan. The rates are onerous, and the risk to the borrower is high. Consider another form of short-term loan, 401(k) loan, or peer-to-peer loan. Each of these will have lower rates and less risk to you if you default.

I hope this information helps you Find. Learn & Save.




JJosef, Oct, 2011
Aren't there laws against over-charging borrowers in the area of interest? When I was growing up, they called it usury.
BBill, Oct, 2011
There are usury laws that limit the amount of interest that vary from state to state. It is an unfortunate reality that the limits are sky high, in most jurisdictions.
sshane, Jan, 2011
I have had a title loan on my truck for the last 4 yrs and now they are wanting payment in full by dec. 31 2010. I don,t have it and now jan. 4 of 2011 i have papers in the mail for court on jan 25 2011. I agreed to pay the $1967 in full in feb 2011 with taxes and they wont accept that agreement. I was told that if I hadnt been to court by the 1st of jan of 2011 that they couldnt take the truck and would have to send my balance to collections and within a year the title would be returned clear if or if not payed. Is this true.
BBill, Jan, 2011
I wish I could give you a quick, yes-or-no answer to your question, but I cannot. The person who can answer your question will need to read your title loan documents and any subsequent agreements you made with the lender. Take all of the documents you have relating to this loan to a lawyer. A lawyer's time is not cheap, but your vehicle is on the line and you need to know your rights and liabilities precisely. I realize this is not the answer you were looking for, but I would rather give you a sincere non-answer than guess about the facts and language in your loan and lead you astray accidentally.